Alabama faces General Fund budget woes­ even after $437M shift

Legislative leaders say 2013 outlook is troubling

The Alabama Legislature convenes Tuesday to begin writing a state operating budget for the fiscal year beginning Oct. 1. But legislative leaders said the outlook is troubling despite the extra money provided by voters, who approved shifting $437 million from savings to shore up the beleaguered General Fund over three years.

The Associated Press

By Phillip RawlsThe Associated Press

Published: Monday, February 4, 2013 at 3:30 a.m.

Last Modified: Sunday, February 3, 2013 at 10:34 p.m.

MONTGOMERY | State agencies that provide programs affecting every Alabama resident could end up with less money for operations in the coming fiscal year even though voters approved shifting $437 million from savings to shore up the beleaguered General Fund over three years.

The Alabama Legislature convenes Tuesday to begin writing a state operating budget for the fiscal year beginning Oct. 1. Gov. Robert Bentley will send his proposed budget to legislators mid-week, and until then, he’s not releasing any details.

But legislative leaders said the outlook is troubling despite the extra money provided by voters. State agencies have been asked to prepare operating plans based on budget cuts of 5 percent to 10 percent for the new fiscal year.

“It’s going to be a tough year in the General Fund,” said Republican Sen. Arthur Orr of Decatur, chairman of the Senate Finance and Taxation-General Fund Committee.

He said tax revenue for the General Fund is flat, unlike the state education budget, where tax revenue is picking up after the recession.

General Fund spending peaked at nearly $1.9 billion in 2008, the last budget before the economic downturn cut state tax revenues.

This year’s General Fund is $1.7 billion. In September, the governor and legislative leaders successfully pushed an amendment to approve transferring $437 million from the Alabama Trust Fund, a state savings account. Of that total, $145.7 million is being used in each of three years, beginning with the current year, to support the General Fund.

Bentley called it a “temporary funding bridge from the Alabama Trust Fund to maintain essential services as we continue to streamline and right-size government.”

For legislators, maintaining essential services in the coming budget is a big challenge.

Senate President Pro Tem Del Marsh said legislators may have to shave as much as $200 million off what state agencies say they need to maintain services in the new budget.

That’s due, in part, to legislators looking at Medicaid needing extra money to maintain health care for the poor and elderly and to concerns about declining conditions in Alabama prisons, including complaints about sexual misconduct at Alabama’s prison for women.

“We are dangerously close to the point with prisons where if we don’t adequately fund prisons, the feds could come in and make us do things we can’t afford,” said Republican Rep. Jim Barton of Mobile, chairman of the House Ways and Means-General Fund Committee.

The House chairman said he hopes the Legislature can give most state agencies about the same amount of money they are getting this year, but that this depends on whether the governor and Legislature can get the rising cost of Medicaid under control.

“The cost-savings this time have to be focused on Medicaid, but we have to do that in a manner that doesn’t hamper access to health care,” Barton said.

Bentley has said Alabama will not expand Medicaid as allowed under President Barack Obama’s health care law, even though the federal government would fully cover costs for the first three years, with its share ultimately dropping to 90 percent. The Republican governor has said the state cannot afford its share of such an expansion.

Orr, Barton’s counterpart in the Senate, said even if the Legislature can give state agencies the same amount of money they are getting this year, they won’t have the same amount to spend on services for Alabama citizens because the amounts they must pay toward health insurance and retirement benefits could go up by $97 million.

The impact will be uneven because some state agencies, such as prisons and state troopers, get most of their money from the General Fund. Others, such as the state Department of Transportation, get most of their money from the federal government and from state taxes set aside specifically for the agencies, such as the gas tax that goes to Transportation. Total spending by state agencies this year, including the General Fund, earmarked state taxes and federal funds, will total about $14 billion.

Orr and Marsh said the Legislature will work to maintain state employees’ benefits, but that there won’t be any money for state employees to get a cost-of-living raise. Their last raise of 3.5 percent came in October 2008.

Orr said legislators will be looking at a variety of cost-­saving measures to ease the budget problems, including exploring whether it might be more efficient to lease Alabama’s state parks to private companies to run or to close state liquor stores and let private businesses handle all retail liquor sales.

When Alabama voters approved the $437 million in borrowing in September, the governor and legislative leaders promised the money would be repaid to the Alabama Trust Fund. Barton and Marsh said the Legislature intends to pass a bill committing the lawmakers to a multi-year repayment schedule.

“The first thing we need to be proving to the citizens of Alabama is you can trust us when we say something,” Barton said.

<p>MONTGOMERY | State agencies that provide programs affecting every Alabama resident could end up with less money for operations in the coming fiscal year even though voters approved shifting $437 million from savings to shore up the beleaguered General Fund over three years. </p><p>The Alabama Legislature convenes Tuesday to begin writing a state operating budget for the fiscal year beginning Oct. 1. Gov. Robert Bentley will send his proposed budget to legislators mid-week, and until then, he's not releasing any details. </p><p>But legislative leaders said the outlook is troubling despite the extra money provided by voters. State agencies have been asked to prepare operating plans based on budget cuts of 5 percent to 10 percent for the new fiscal year. </p><p>“It's going to be a tough year in the General Fund,” said Republican Sen. Arthur Orr of Decatur, chairman of the Senate Finance and Taxation-General Fund Committee. </p><p>He said tax revenue for the General Fund is flat, unlike the state education budget, where tax revenue is picking up after the recession. </p><p>General Fund spending peaked at nearly $1.9 billion in 2008, the last budget before the economic downturn cut state tax revenues. </p><p>This year's General Fund is $1.7 billion. In September, the governor and legislative leaders successfully pushed an amendment to approve transferring $437 million from the Alabama Trust Fund, a state savings account. Of that total, $145.7 million is being used in each of three years, beginning with the current year, to support the General Fund. </p><p>Bentley called it a “temporary funding bridge from the Alabama Trust Fund to maintain essential services as we continue to streamline and right-size government.” </p><p>For legislators, maintaining essential services in the coming budget is a big challenge. </p><p>Senate President Pro Tem Del Marsh said legislators may have to shave as much as $200 million off what state agencies say they need to maintain services in the new budget. </p><p>That's due, in part, to legislators looking at Medicaid needing extra money to maintain health care for the poor and elderly and to concerns about declining conditions in Alabama prisons, including complaints about sexual misconduct at Alabama's prison for women. </p><p>“We are dangerously close to the point with prisons where if we don't adequately fund prisons, the feds could come in and make us do things we can't afford,” said Republican Rep. Jim Barton of Mobile, chairman of the House Ways and Means-General Fund Committee. </p><p>The House chairman said he hopes the Legislature can give most state agencies about the same amount of money they are getting this year, but that this depends on whether the governor and Legislature can get the rising cost of Medicaid under control. </p><p>“The cost-savings this time have to be focused on Medicaid, but we have to do that in a manner that doesn't hamper access to health care,” Barton said. </p><p>Bentley has said Alabama will not expand Medicaid as allowed under President Barack Obama's health care law, even though the federal government would fully cover costs for the first three years, with its share ultimately dropping to 90 percent. The Republican governor has said the state cannot afford its share of such an expansion. </p><p>Orr, Barton's counterpart in the Senate, said even if the Legislature can give state agencies the same amount of money they are getting this year, they won't have the same amount to spend on services for Alabama citizens because the amounts they must pay toward health insurance and retirement benefits could go up by $97 million. </p><p>The impact will be uneven because some state agencies, such as prisons and state troopers, get most of their money from the General Fund. Others, such as the state Department of Transportation, get most of their money from the federal government and from state taxes set aside specifically for the agencies, such as the gas tax that goes to Transportation. Total spending by state agencies this year, including the General Fund, earmarked state taxes and federal funds, will total about $14 billion. </p><p>Orr and Marsh said the Legislature will work to maintain state employees' benefits, but that there won't be any money for state employees to get a cost-of-living raise. Their last raise of 3.5 percent came in October 2008. </p><p>Orr said legislators will be looking at a variety of cost-­saving measures to ease the budget problems, including exploring whether it might be more efficient to lease Alabama's state parks to private companies to run or to close state liquor stores and let private businesses handle all retail liquor sales. </p><p>When Alabama voters approved the $437 million in borrowing in September, the governor and legislative leaders promised the money would be repaid to the Alabama Trust Fund. Barton and Marsh said the Legislature intends to pass a bill committing the lawmakers to a multi-year repayment schedule. </p><p>“The first thing we need to be proving to the citizens of Alabama is you can trust us when we say something,” Barton said.</p>